law of large numbers

Apple sold 10% fewer iPhones than predicted, and other reactions to Apple’s earnings

January 27, 2014
Obsession
Mobile Web
January 27, 2014

Apple’s earnings are out. For a company that is dependent on a single product for the bulk of its revenue, there’s some bad news.

But that news is only bad if you’re an investor who has his or her notions of Apple’s current value pegged to analysts’ consensus estimates on iPhone sales. Revenue beat analysts’ expectations, but just barely: $57.6 billion versus $57.5 billion. Meanwhile, 51 million iPhones sold in a single quarter is still healthy growth, and impressive given that Apple is running up against the law of large numbers as it seeks to expand its revenue from iPhone.

Just look at the graph of Apple’s overall sales of iPhone and iPads; growth may be leveling off, but you don’t have to fit a curve to this chart to see that it’s continuing at a healthy pace.

On the back of the growth in sales of iPhones and iPads, Apple’s gross margins are rising.

And revenue continues to grow at almost the same pace as iPhone sales.

It does appear that the sunset of the iPod is near.

Overall, there doesn’t appear to be anything in this report that indicates that Apple is doing anything other than continuing to be a cash factory that delivers healthy growth despite the “maturation” of the market for smartphones.

And just to put things in perspective, 51 million iPhones is a huge number for a consumer gadget. It’s 2.5x as many phones as the total number of extra-large Android smartphones, known as phablets, were sold in all of 2013. And it makes the sales of some game consoles look puny.

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